STAND. COM. REP. NO. 1427-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 2706
                                     S.D. 1
                                     H.D. 2




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Finance, to which was referred S.B. No.
2706, S.D. 1, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this bill, which is applicable to offshore
aircraft leasing companies, is to provide:

     (1)  A general excise tax (GET) exemption for amounts
          received as rent for the leasing or rental of aircraft
          or aircraft engine used by lessees or renters for
          interstate air transportation of passengers and goods;
          and

     (2)  A use tax exemption for the acquisition or importation
          of aircraft or aircraft engines by a lessee or renter
          engaged in interstate air transportation.

     Supporting testimony was received from Hawaiian Airlines and
Hawaiian Airlines Master Executive Council of the Air Line Pilots
Association International.  The Tax Foundation of Hawaii
submitted comments on this measure.  The Department of Taxation
testified in opposition to this measure.

     Your Committee has amended this bill by, among other things:

     (1)  Giving a taxpayer the option of:

 
 
                                 STAND. COM. REP. NO. 1427-00
                                 Page 2

 
          (a)  Taking a GET exemption for amounts received as
               rent for the leasing or rental of aircraft or
               aircraft engine used by lessees or renters for
               interstate air transportation of passengers or
               goods; or

          (b)  Receiving an aircraft operating lease investment
               income tax credit, which shall be deductible from
               the net income tax liability of a lessee of an
               aircraft under an operating lease who is subject
               to the income tax;

          and

     (2)  Making technical, nonsubstantive amendments for clarity
          and style.

     As affirmed by the record of votes of the members of your
Committee on Finance that is attached to this report, your
Committee is in accord with the intent and purpose of S.B. No.
2706, S.D. 1, H.D. 1, as amended herein, and recommends that it
pass Third Reading in the form attached hereto as S.B. No. 2706,
S.D. 1, H.D. 2.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Finance,



                                   ______________________________
                                   DWIGHT Y. TAKAMINE, Chair